Why You Should Consider Pay-per-Mile Car Insurance

With gas prices on the rise and an economy leaving everyone keeping their wallets closed, some consumers are urgently turning to alternatives forms of transportation. Such alternatives have included using public transportation, ride sharing, and working from home. However, consumers have not yet felt a decrease in auto insurance prices, despite them driving less often. The cost of automobile insurance coverage remains at a fixed price, regardless of the amount of time spent in the car.

Insurance companies are catching on to the new trend of their customers, and some states are now offering a pay-per-mile or pay-as-you-drive policy. These new policies "reward" customers who are reducing their emissions and staying off the road as often, which saves money for both the insurance provider and the customer.

The new program, in its simplest form, works in that the customer pays for the amount of time they spend on the road. This is of great benefit to those who do not want to pay full coverage prices for making their one trip to the grocery store and back every week. It is particularly of interest to low-income drivers whose coverage is often more than their driving habits and accident claims reflect. Essentially, pay-per-mile auto insurance puts control in the hands of you, the consumer, which is ultimately positive since it allows you to make the best decision for you and your family's driving needs.

Exactly How Does the Pay-Per-Mile Program Work?

There are a few techniques being considered for the pay-per-mile program to detect your automobile mile usage. The first method involves installing an odometer in your vehicle that tracks mileage. The odometer system also includes a cell phone that calls in your mileage to your insurance company at various times.

The second method includes installing a GPS system with an included cell phone in your automobile, which would track exact routes and mileage. Some states that use the pay-per-mile program only require that you bring your vehicle in every so often to verify that you have not driven over the required maximum mileage.

Some consumers are afraid of the new program due to privacy issues; however, there could prove to be some advantages, such as basic savings on automobile insurance, as well as using GPS to track exact routes. With the GPS system, exact routes and times are logged. Thus, insurance companies can see frequency of time traveled during rush hour and miles traveled. This could ultimately save the customers who spend time in rush hour, but who do not travel far.

Essentially, pay-per-mile is just an update from the pay-per-car system that is standard in the auto insurance industry. The majority of states require drivers to carry car insurance before he or she can register a vehicle with the state. Drivers caught without sufficient car insurance can be fined and penalized. They can even have their driver's license revoked.

Car insurance can be expensive though, especially with people dealing with high unemployment rates and increases because companies are not performing well. Insurance fraud is another issue causing the rates to increase.

States Take Action and Offer Pay-Per-Mile

States that mandate auto coverage are starting to see the upside to the pay-per-mile system. Texas is one such state. They have adopted a cents-per-mile choice law that authorizes insurance companies to offer customers the choice between their old car insurance premium rates or switching to the newer system. The state uses the example of sticking with a fixed $600 a year premium rate or paying four cent a mile for the same risk. With that kind of deal, you would only have to pay $80 if you drove 2,000 miles.

Of course, this is not always the best option. As you can see from the Texas example, drivers who put 16,000 miles or more on their vehicles will end up paying more than the fixed premium rate. It used to be that the standard amount of miles per year was around 15,000, but as people are continuing to have to drive further and further for work, they are putting on over 20,000.

California is another state that wants to offer the pay-per-mile auto insurance policy. They are getting closer to allowing drivers to choose this option. Mile Meter allows a driver to be covered for a wide range of miles, most typically 1,000 to 6,000 miles. Clearly, these are great deals for drivers who are not on the road often. Living in a state that offers more than adequate public transportation makes it easier to skip driving your own vehicle.

Drivers in Minnesota can be apart of a test system using an onboard diagnostics system. It is only open to drivers who own a car that is older than 1996, so about 10 years or older, and it uses an electronic device to calculate the amount of miles driven. This information is sent to the insurance company and then they can apply the appropriate discount.

States are not the only ones recognizing the benefits of the pay-per-mile system. Environmentalists also enjoy the idea of people driving less. The more you drive the less emissions are released into the air, which reduces your carbon footprint. So rewarding drivers, who drive less, will send a message that you can save money and save the environment when you limit how much you drive.

Environmentalists are hoping that the pay-per-mile catches on as a "go green" idea. They have already seen the affects a green vehicle can make on the roadway, so why not go even greener by allowing you to save your money and limit the impact you have on the environment.

Additional Ways Consumers Can Save on Car Insurance

Knowing all the ways you can save on your auto insurance is the best thing to do in any economic situation. It is always better to be a good steward of your personal finances. Unfortunately, given the current economic state, it is even more vital that you watch every penny spent.

Shopping for car insurance can be expensive. The different types of coverage options, your driving record and even your personal credit history will all be used to determine your premium rate. That is why you need to shop around. Shopping around for insurance gives you the advantage to find the cheapest car insurance premium rates in your area. Using the Internet is a great tool because it allows you to compare your coverage options with several insurance companies all at the same time.

Do some research into your current provider and see where they stand on the pay-per-mile system. Even if you do not like the idea of a GPS system, you can always talk to an insurance agent and see what new discounts they are offering for low mileage drivers. You do not have to choose a pay-per-mile option to save on low mileage. Car insurance companies already offer discounts and incentives to drivers who limit their city driving, nighttime driving and the amount of miles that he or she puts on a vehicle. Giving yourself time to research the insurance company of your choice will help you make the best decision on auto insurance.